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Martin Weitzman has written a serious book about the chronic prob?
lem of stagflation that has plagued the United States economy for the past
twenty years. As discussed below, I have grave reservations both about the
underlying microeconomic model on which Weitzman relies and about the
basic policy proposal that he advances. Neither, in my judgment, is sufficiently
microanalytic to come to terms with the fundamentals of contracting
in the labor market?the key market in Weitzman's analysis of
stagflation. Of books that work within the firm-as-production-function
tradition, however, Weitzman's treatment of stagflation is the best of its
kind. It has justifiably attracted wide attention and received high praise.
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